Customers Bancorp, Inc.

Previous wording

Management’s discussion and analysis represents an overview of the financial condition and results of operations, and highlights the significant changes in the financial condition and results of operations, as presented in the accompanying consolidated financial statements for Customers Bancorp, Inc. (the “Bancorp” or “Customers Bancorp”), a financial holding company, and its wholly owned subsidiaries, including Customers Bank (the “Bank”), collectively referred to as “Customers” herein. This information is intended to facilitate your understanding and assessment of significant changes and trends related to Customers’ financial condition and results of operations as of and for the three months ended March 31, 2025. All quarterly information in this Management’s Discussion and Analysis is unaudited. You should read this section in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Customers’ 2024 Form 10-K.

Current wording

Management’s discussion and analysis represents an overview of the financial condition and results of operations, and highlights the significant changes in the financial condition and results of operations, as presented in the accompanying consolidated financial statements for Customers Bancorp, Inc. (the “Bancorp” or “Customers Bancorp”), a financial holding company, and its wholly owned subsidiaries, including Customers Bank (the “Bank”), collectively referred to as “Customers” herein. This information is intended to facilitate your understanding and assessment of significant changes and trends related to Customers’ financial condition and results of operations as of and for the three and six months ended June 30, 2025. All quarterly information in this Management’s Discussion and Analysis is unaudited. You should read this section in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Customers’ 2024 Form 10-K.

Previous wording

Inflation remains slightly elevated in 2025. The Federal Reserve raised interest rates significantly throughout 2022 and into 2023 in attempts to bring the inflation to its long run target rate of two percent. The Federal Reserve has stated that inflation is moving sustainably toward two percent, and that the risks to achieving its employment and inflation goals are roughly in balance. In light of the progress on inflation and the balance of risks, the Federal Reserve began lowering the federal funds rate in late 2024. Most recently, the Federal Reserve has maintained the federal funds rate, and stated that they would assess incoming data, the evolving outlook and the balance of risks in further lowering the federal funds rate. Significant uncertainties exist as to the extent and timing of future rate cuts and their effects on the economic conditions.

Current wording

Inflation remains slightly elevated in 2025. The Federal Reserve has maintained the federal funds rate, and stated that they would assess incoming data, the evolving outlook and the balance of risks in further lowering the federal funds rate. Significant uncertainties exist as to the extent and timing of future rate cuts and their effects on the economic conditions.

Previous wording

Significant uncertainties as to future economic conditions continue to exist, including risks of higher inflation and sustained higher interest rate environment, changes in U.S. trade policies including the imposition of tariffs and retaliatory tariffs on its trading partners, elevated liquidity risk to the U.S. banking system and the exposure to the U.S. commercial real estate market, particularly to the regional banks, disruptions to global supply chain and labor markets and higher oil and commodity prices exacerbated by the military conflicts between Russia and Ukraine and in the Middle East. Customers has maintained higher levels of liquidity, reserves for credit losses on loans and leases and off-balance sheet credit exposures and strong capital ratios, and shifted the mix of its loan portfolio towards low credit risk commercial loans with floating or adjustable interest rates during the period of high interest rates. As the interest rates begin to decline, Customers has been reducing the Bank’s asset sensitivity through derivative hedging and investment securities portfolio rebalancing. Customers remains focused on growing its non-interest bearing and lower-cost interest-bearing deposits. Customers’ exposure to higher risk commercial real estate such as the office sector is minimal, representing approximately 1% of the loan portfolio as of March 31, 2025. The Bank’s debt securities available for sale and held to maturity are available to be pledged as collateral to the FRB and FHLB for additional liquidity. The Bank had approximately $5.2 billion in immediate available liquidity from the FRB and FHLB and cash on hand of $3.4 billion as of March 31, 2025. The Bank’s estimated FDIC insured deposits represented approximately 61% of our deposits (inclusive of accrued interest) as of March 31, 2025. When including collateralized and affiliate deposits as FDIC insured, this number increased to 70% of our deposits as of March 31, 2025. Customers continues to monitor closely the impact of uncertainties affecting the macroeconomic conditions, the U.S. banking system, particularly regional banks, the military conflicts between Russia and Ukraine and in the Middle East, as well as any effects that may result from the federal government’s responses including future rate and regulatory actions; however, the extent to which inflation, interest rates and other macroeconomic and industry factors, the geopolitical conflicts and developments in the U.S. banking system will impact Customers’ operations and financial results during the remainder of 2025 is highly uncertain.

Current wording

Significant uncertainties as to future economic conditions continue to exist, including risks of higher inflation and sustained higher interest rate environment, changes in U.S. trade policies including the imposition of tariffs and retaliatory tariffs on its trading partners, elevated liquidity risk to the U.S. banking system and the exposure to the U.S. commercial real estate market, particularly to the regional banks, disruptions to global supply chain and labor markets and higher oil and commodity prices exacerbated by the military conflicts between Russia and Ukraine and in the Middle East. Customers has maintained higher levels of liquidity, reserves for credit losses on loans and leases and off-balance sheet credit exposures and strong capital ratios, and shifted the mix of its loan portfolio towards low credit risk commercial loans with floating or adjustable interest rates during the period of high interest rates. As the interest rates begin to decline, Customers has been reducing the Bank’s asset sensitivity through derivative hedging and investment securities portfolio rebalancing. Customers remains focused on growing its non-interest bearing and lower-cost interest-bearing deposits. Customers’ exposure to the higher risk commercial real estate office sector is minimal, representing approximately 1% of the loan portfolio as of June 30, 2025. The Bank’s debt securities available for sale and held to maturity are available to be pledged as collateral to the FRB and FHLB for additional liquidity. The Bank had approximately $5.1 billion in immediate available liquidity from the FRB and FHLB and cash on hand of $3.5 billion as of June 30, 2025. The Bank’s estimated FDIC insured deposits represented approximately 61% of our deposits (inclusive of accrued interest) as of June 30, 2025. When including collateralized and affiliate deposits as FDIC insured, this number increased to 70% of our deposits as of June 30, 2025. Customers continues to monitor closely the impact of uncertainties affecting the macroeconomic conditions, the U.S. banking system, particularly regional banks, the military conflicts between Russia and Ukraine and in the Middle East, as well as any effects that may result from the federal government’s responses including future rate and regulatory actions; however, the extent to which inflation, interest rates and other macroeconomic and industry factors, the geopolitical conflicts and developments in the U.S. banking system will impact Customers’ operations and financial results during the remainder of 2025 is highly uncertain.

Previous wording

The ACL may be affected materially by a variety of qualitative factors that Customers considers to reflect its current judgment of various events and risks that are not measured in our statistical procedures, including uncertainty related to the economic forecasts used in the modelled credit loss estimates, nature and volume of the loan and lease portfolio, credit underwriting policy exceptions, peer comparison, industry data, and model and data limitations. The qualitative allowance for economic forecast risk is further informed by multiple alternative scenarios, as deemed applicable, to arrive at a scenario or a composite of scenarios supporting the period-end ACL balance. The evaluation process is inherently imprecise and subjective as it requires significant management judgment based on underlying factors that are susceptible to changes, sometimes materially and rapidly. Customers recognizes that this approach may not be suitable in certain economic environments such that additional analysis may be performed at management’s discretion. Due in part to its subjectivity, the qualitative evaluation may be materially impacted during periods of economic uncertainty and late breaking events that could lead to a revision of reserves to reflect management’s best estimate of expected credit losses.

Current wording

The ACL may be affected materially by a variety of qualitative factors that Customers considers to reflect its current judgment of various events and risks that are not measured in our statistical procedures, including uncertainty related to the economic forecasts used in the modeled credit loss estimates, nature and volume of the loan and lease portfolio, credit underwriting policy exceptions, peer comparison, industry data, and model and data limitations. The qualitative allowance for economic forecast risk is further informed by multiple alternative scenarios, as deemed applicable, to arrive at a scenario or a composite of scenarios supporting the period-end ACL balance. The evaluation process is inherently imprecise and subjective as it requires significant management judgment based on underlying factors that are susceptible to changes, sometimes materially and rapidly. Customers recognizes that this approach may not be suitable in certain economic environments such that additional analysis may be performed at management’s discretion. Due in part to its subjectivity, the qualitative evaluation may be materially impacted during periods of economic uncertainty and late breaking events that could lead to a revision of reserves to reflect management’s best estimate of expected credit losses.

Previous wording

The net increase in our estimated ACL as of March 31, 2025 as compared to December 31, 2024 resulted primarily from slight deterioration in macroeconomic forecasts and higher loan balances held for investment. The provision for credit losses on loans and leases was $21.4 million for the three months ended March 31, 2025, for an ending ACL balance of $147.2 million ($141.1 million for loans and leases and $6.1 million for unfunded lending-related commitments) as of March 31, 2025.

Current wording

The net increase in our estimated ACL as of June 30, 2025 as compared to December 31, 2024 resulted primarily from slight deterioration in macroeconomic forecasts and higher loan balances held for investment. The provision for credit losses on loans and leases was $18.5 million and $39.9 million for the three and six months ended June 30, 2025, respectively, for an ending ACL balance of $155.1 million ($147.4 million for loans and leases and $7.7 million for unfunded lending-related commitments) as of June 30, 2025.

Previous wording

To determine the ACL as of March 31, 2025, Customers utilized Moody’s March 2025 Baseline forecast to generate its modelled expected losses and considered Moody’s other alternative economic forecast scenarios to qualitatively adjust the modelled ACL by loan portfolio in order to reflect management’s reasonable expectations of current and future economic conditions. The Baseline forecast at March 2025 assumed slight deterioration in macroeconomic forecasts from the fourth quarter 2024 forecasts of macroeconomic conditions used by Customers; the Federal Reserve Board lowering interest rates twice in 2025 and gradually reducing the policy rate to its neutral level by late 2026, as uncertainty of economic policies weighs on near-term growth including inflationary pressures from the new administration’s tariff increases, immigrant deportations, federal government payroll and funding cuts, and corporate and individual tax cuts; failures of several banks in the first half of 2023 are not symptomatic of a serious broader problem in the financial system and policymakers’ aggressive response will ensure that the failures do not weaken the financial system or undermine economic growth; a cessation of the military conflict between Russia and Ukraine looks increasingly likely but the impact on energy, agriculture and other commodity markets will be modest; the war in Israel not spreading to other parts of the Middle East and mitigating any disruption to global energy markets and global shipping; the CPI rising 3.1% in 2025 and 2.8% in 2026; and the unemployment rate rising to 4.1% in 2025 and 4.3% in 2026. Customers continues to monitor the impact of the U.S. banking system weaknesses, the military conflicts between Russia and Ukraine and in the Middle East, inflation, and monetary and fiscal policy measures on the U.S. economy and, if pace of the expected recovery is worse than expected, further meaningful provisions for credit losses could be required.

Current wording

To determine the ACL as of June 30, 2025, Customers utilized Moody’s June 2025 Baseline forecast to generate its modeled expected losses and considered Moody’s other alternative economic forecast scenarios to qualitatively adjust the modeled ACL by loan portfolio in order to reflect management’s reasonable expectations of current and future economic conditions. The Baseline forecast at June 2025 assumed slight deterioration in macroeconomic forecasts from the first quarter 2025 forecasts of macroeconomic conditions used by Customers; the Federal Reserve Board lowering interest rates in September and December 2025 and gradually reducing the policy rate to its neutral level by late 2026; high tariffs, including those on China, prove brief, but that tariffs remain materially higher than in 2024 through the end of the current administration’s term; failures of several banks in the first half of 2023 are not symptomatic of a serious broader problem in the financial system and policymakers’ aggressive response will ensure that the failures do not weaken the financial system or undermine economic growth; a cessation of the military conflict between Russia and Ukraine looks increasingly likely but the impact on energy, agriculture and other commodity markets will be modest; the war in Israel not spreading to other parts of the Middle East, including Iran and mitigating any disruption to global energy markets and global shipping; the CPI rising 2.8% in 2025 and 3.2% in 2026; and the unemployment rate rising to 4.2% in 2025 and 4.7% in 2026 as the outlook for the job market remains weak from the global trade war. Customers continues to monitor the impact of the U.S. banking system weaknesses, the military conflicts between Russia and Ukraine and in the Middle East, high tariffs, inflation, and monetary and fiscal policy measures on the U.S. economy and, if pace of the expected recovery is worse than expected, further meaningful provisions for credit losses could be required.

Previous wording

As of December 31, 2024, the ACL ending balance was $141.7 million ($136.8 million for loans and leases and $4.9 million for unfunded lending-related commitments). To determine the ACL as of December 31, 2024, Customers utilized the Moody’s December 2024 Baseline forecast to generate its modelled expected losses and considered Moody’s other alternative economic forecast scenarios to qualitatively adjust the modelled ACL by loan portfolio in order to reflect management’s reasonable expectations of current and future economic conditions. The Baseline forecast at December 31, 2024 assumed slight improvements in macroeconomic forecasts compared to the macroeconomic forecasts used by Customers in 2023; the Federal Reserve Board lowering interest rates twice in 2025 and gradually reducing the policy rate to its neutral level by late 2026, as slower progress in reducing inflation and additional inflationary pressures from the new administration’s fiscal, tariff and immigration plans suggest a slower pace of normalization than previously expected; failures of several regional banks in the first half of 2023 and recent issues around other banks are not symptomatic of a broader problem in the U.S. financial system and policymakers’ aggressive response will ensure that the failures do not weaken the financial system or further undermine economic growth; the military conflict between Russia and Ukraine continuing for the foreseeable future but its impact on energy, agriculture and other commodity markets and the global economy has largely faded; the war in Israel not spreading to other parts of the Middle East and disrupting global energy markets and global shipping; the CPI rising 2.3% in 2025 and 2.8% in 2026; and the unemployment rate rising to 4.1% in 2025 and 2026.

Current wording

As of December 31, 2024, the ACL ending balance was $141.7 million ($136.8 million for loans and leases and $4.9 million for unfunded lending-related commitments). To determine the ACL as of December 31, 2024, Customers utilized the Moody’s December 2024 Baseline forecast to generate its modeled expected losses and considered Moody’s other alternative economic forecast scenarios to qualitatively adjust the modeled ACL by loan portfolio in order to reflect management’s reasonable expectations of current and future economic conditions. The Baseline forecast at December 31, 2024 assumed slight improvements in macroeconomic forecasts compared to the macroeconomic forecasts used by Customers in 2023; the Federal Reserve Board lowering interest rates twice in 2025 and gradually reducing the policy rate to its neutral level by late 2026, as slower progress in reducing inflation and additional inflationary pressures from the new administration’s fiscal, tariff and immigration plans suggest a slower pace of normalization than previously expected; failures of several regional banks in the first half of 2023 and recent issues around other banks are not symptomatic of a broader problem in the U.S. financial system and policymakers’ aggressive response will ensure that the failures do not weaken the financial system or further undermine economic growth; the military conflict between Russia and Ukraine continuing for the foreseeable future but its impact on energy, agriculture and other commodity markets and the global economy has largely faded; the war in Israel not spreading to other parts of the Middle East and disrupting global energy markets and global shipping; the CPI rising 2.3% in 2025 and 2.8% in 2026; and the unemployment rate rising to 4.1% in 2025 and 2026.

Previous wording

One of the most significant judgments influencing the ACL is the macroeconomic forecasts from Moody’s. Changes in the economic forecasts could significantly affect the estimated credit losses which could potentially lead to materially different allowance levels from one reporting period to the next. Given the dynamic relationship between macroeconomic variables within Customers’ modelling framework, it is difficult to estimate the impact of a change in any one individual variable on the ACL. However, to illustrate a hypothetical sensitivity analysis, management calculated a quantitative allowance using a 100% weighting applied to an adverse scenario. This scenario includes assumptions around the impact of the new administration’s tariffs and deportations on the economy being significantly worse than expected causing inflation to accelerate; elevated interest rates weakening credit-sensitive spending more than anticipated, and rising inflation causing the Federal Reserve Board to raise the fed fund rate; military conflict between Russia and Ukraine persisting longer than expected; the ceasefire in Israel collapsing; the combination of tariffs, rising inflation, deportations, political tensions, elevated interest rates and reduced credit availability causing the economy to fall into recession in the second quarter of 2025; and unemployment beginning to increase significantly in the second quarter of 2025 and peaking in the second quarter of 2026. Under this scenario, as an example, the unemployment rate is estimated at 6.2% and 8.2% in 2025 and 2026, respectively. These numbers represent a 2.1% and 3.9% higher unemployment estimate than the Baseline scenario projection of 4.1% and 4.3% for the same time periods, respectively. To demonstrate the sensitivity to key economic parameters, management calculated the difference between a 100% Baseline weighting and a 100% adverse scenario weighting for modelled results. This would result in an incremental quantitative impact to the ACL of approximately $80 million at March 31, 2025. This resulting difference is not intended to represent an expected increase in ACL levels since (i) Customers may use a weighted approach applied to multiple economic scenarios for its ACL process, (ii) the highly uncertain economic environment, (iii) the difficulty in predicting inter-relationships between macroeconomic variables used in various economic scenarios, and (iv) the sensitivity analysis does not account for any qualitative adjustments incorporated by Customers as part of its overall ACL framework.

Current wording

One of the most significant judgments influencing the ACL is the macroeconomic forecasts from Moody’s. Changes in the economic forecasts could significantly affect the estimated credit losses which could potentially lead to materially different allowance levels from one reporting period to the next. Given the dynamic relationship between macroeconomic variables within Customers’ modeling framework, it is difficult to estimate the impact of a change in any one individual variable on the ACL. However, to illustrate a hypothetical sensitivity analysis, management calculated a quantitative allowance using a 100% weighting applied to an adverse scenario. This scenario includes assumptions around the impact of the current administration’s tariffs and deportations on the economy being significantly worse than expected causing inflation to rise and the Federal Reserve Board to raise the fed fund rate; elevated interest rates weakening credit-sensitive spending more than anticipated and business and consumer confidence to decline; military conflict between Russia and Ukraine persisting longer than expected; the conflict in Israel widening; the combination of tariffs, rising inflation, deportations, political tensions, elevated interest rates and reduced credit availability causing the economy to fall into recession in the third quarter of 2025; real GDP declining cumulatively by 2.6% from the second quarter of 2025 through the first quarter of 2026; declines in European economies and retaliatory tariffs hurting U.S. exports; and unemployment beginning to increase significantly in the third quarter of 2025 and peaking in the third quarter of 2026. Under this scenario, as an example, the unemployment rate is estimated at 5.4% and 8.2% in 2025 and 2026, respectively. These numbers represent a 1.2% and 3.5% higher unemployment estimate than the Baseline scenario projection of 4.2% and 4.7% for the same time periods, respectively. To demonstrate the sensitivity to key economic parameters, management calculated the difference between a 100% Baseline weighting and a 100% adverse scenario weighting for modeled results. This would result in an incremental quantitative impact to the ACL of approximately $82 million at June 30, 2025. This resulting difference is not intended to represent an expected increase in ACL levels since (i) Customers may use a weighted approach applied to multiple economic scenarios for its ACL process, (ii) the highly uncertain economic environment, (iii) the difficulty in predicting inter-relationships between macroeconomic variables used in various economic scenarios, and (iv) the sensitivity analysis does not account for any qualitative adjustments incorporated by Customers as part of its overall ACL framework.

Previous wording

The following table sets forth the condensed statements of income for the three months ended March 31, 2025 and 2024:

Current wording

The following table sets forth the condensed statements of income for the three and six months ended June 30, 2025 and 2024:

Previous wording

Customers reported net income available to common shareholders of $9.5 million for the three months ended March 31, 2025, compared to net income available to common shareholders of $45.9 million for the three months ended March 31, 2024. Factors contributing to the change in net income available to common shareholders for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 were as follows:

Current wording

Customers reported net income available to common shareholders of $55.8 million and $65.4 million for the three and six months ended June 30, 2025, respectively, compared to net income available to common shareholders of $54.3 million and $100.2 million for the three and six months ended June 30, 2024, respectively. Factors contributing to the change in net income available to common shareholders for the three and six months ended June 30, 2025 compared to the three and six months ended June 30, 2024 were as follows:

Previous wording

Net interest income increased $7.1 million for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 primarily due to lower interest expense on deposits, partially offset by a decrease in interest income from interest-bearing deposits and investment securities. Average interest-earning assets increased by $776.2 million for the three months ended March 31, 2025, compared to the three months ended March 31, 2024. The increase in interest-earning assets was primarily driven by an increase in specialized lending. NIM increased by 3 basis points to 3.13% for the three months ended March 31, 2025 from 3.10% for the three months ended March 31, 2024. The NIM increase was primarily attributable to a favorable shift in deposit mix and lower market interest rates on deposits, which drove a 53 basis point decrease in the cost of interest-bearing liabilities for the three months ended March 31, 2025 compared to the three months ended March 31, 2024. Customers’ total cost of funds, including non-interest bearing deposits was 2.96% and 3.55% for the three months ended March 31, 2025 and 2024, respectively.

Current wording

Net interest income increased $9.1 million for the three months ended June 30, 2025 compared to the three months ended June 30, 2024 primarily due to lower interest expense on deposits and an increase in interest income from specialized lending, multifamily and mortgage finance, partially offset by a decrease in interest income from investment securities, consumer installment loans and interest-bearing deposits. Average interest-earning assets increased by $1.2 billion for the three months ended June 30, 2025, compared to the three months ended June 30, 2024. The increase in interest-earning assets was primarily driven by an increase in specialized lending, partially offset by a decrease in investment securities. NIM decreased by 2 basis points to 3.27% for the three months ended June 30, 2025 from 3.29% for the three months ended June 30, 2024. The NIM decrease was primarily attributable to decreases in market interest rates in specialized lending and interest-earning deposits, partially offset by lower cost of deposits from a favorable shift in deposit mix and lower market interest rates on deposits, which drove a 52 basis point decrease in the cost of interest-bearing liabilities for the three months ended June 30, 2025 compared to the three months ended June 30, 2024. Customers’ total cost of funds, including non-interest bearing deposits was 2.99% and 3.51% for the three months ended June 30, 2025 and 2024, respectively.

Previous wording

The $11.2 million increase in the provision for credit losses included $5.5 million increase in provision for credit losses on loans and leases for the three months ended March 31, 2025 compared to the three months ended March 31, 2024, which primarily reflects a slight deterioration in macroeconomic forecasts and an increase in loan balances held for investment. The ACL on off-balance sheet credit exposures is presented within accrued interest payable and other liabilities in the consolidated balance sheet and the related provision is presented as part of other non-interest expense on the consolidated statement of income. The ACL on loans and leases held for investment represented 1.04% of total loans and leases receivable at March 31, 2025, compared to 1.12% of total loans and leases receivable at March 31, 2024. Net charge-offs for the three months ended March 31, 2025 were $17.1 million, or 48 basis points of average loans and leases on an annualized basis, compared to net charge-offs of $18.0 million, or 55 basis points on an annualized basis, for the three months ended March 31, 2024. The decrease in net charge-offs for the three months ended March 31, 2025, compared to the three months ended March 31, 2024, was primarily due to lower charge-offs for consumer installment loans, partially offset by higher charge-offs for multifamily loans.

Current wording

The $2.7 million increase in the provision for credit losses for the three months ended June 30, 2025 compared to the three months ended June 30, 2024 included $0.6 million increase in provision for credit losses on loans and leases for the three months ended June 30, 2025 compared to the three months ended June 30, 2024, which primarily reflects a slight deterioration in macroeconomic forecasts and an increase in loan balances held for investment. The ACL on off-balance sheet credit exposures is presented within accrued interest payable and other liabilities in the consolidated balance sheet and the related provision is presented as part of other non-interest expense on the consolidated statement of income. The ACL on loans and leases held for investment represented 1.07% of total loans and leases receivable at June 30, 2025, compared to 1.08% of total loans and leases receivable at June 30, 2024. Net charge-offs for the three months ended June 30, 2025 were $13.1 million, or 35 basis points of average loans and leases on an annualized basis, compared to net charge-offs of $18.7 million, or 56 basis points on an annualized basis, for the three months ended June 30, 2024. The decrease in net charge-offs for the three months ended June 30, 2025, compared to the three months ended June 30, 2024, was primarily due to lower charge-offs for consumer installment loans.

Previous wording

The provision for credit losses for the three months ended March 31, 2025 and 2024 also included a provision for credit losses of $6.9 million and $1.1 million, respectively, on certain debt securities available for sale. Refer to “NOTE 5 – INVESTMENT SECURITIES” to Customers’ unaudited consolidated financial statements for additional information.

Current wording

The provision for credit losses for the three months ended June 30, 2025 and 2024 also included a provision for credit losses of $2.3 million and $0.3 million, respectively, on certain debt securities available for sale. The provision for credit losses on certain debt securities available for sale was $9.2 million and $1.4 million for the six months ended June 30, 2025 and 2024, respectively. Refer to “NOTE 5 – INVESTMENT SECURITIES” to Customers’ unaudited consolidated financial statements for additional information.

Previous wording

The $45.7 million decrease in non-interest income for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 primarily resulted from $51.3 million of impairment loss on investment securities that the Bank decided to sell as of March 31, 2025, in order to further improve structural liquidity, enhance credit profile, reduce asset sensitivity and benefit margin, partially offset by increases of $2.0 million in loan fees, $1.4 million in bank-owned life insurance income, $1.3 million in other non-interest income and $1.0 million in commercial lease income for the three months ended March 31, 2025 compared to the three months ended March 31, 2024.

Current wording

The $47.2 million decrease in non-interest income for the six months ended June 30, 2025 compared to the six months ended June 30, 2024 primarily resulted from $51.3 million of impairment loss on certain AFS debt securities that the Bank decided to sell in order to further improve structural liquidity, enhance credit profile, reduce asset sensitivity and benefit margin during the six months ended June 30, 2025, $11.0 million of unrealized gain on equity method investment with a fair value of $16.0 million purchased at a discount for the six months ended June 30, 2024 and an increase of $1.0 million in net loss on sale of investment securities, partially offset by increases of $6.7 million in other non-interest income, $5.8 million in loan fees, $1.8 million in commercial lease income and $1.6 million in bank-owned life insurance income for the six months ended June 30, 2025 compared to the six months ended June 30, 2024.

Previous wording

The $3.6 million increase in non-interest expense for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 primarily resulted from increases of $6.6 million in salaries and employee benefits, $5.5 million in professional services, $1.8 million in other non-interest expense and $1.1 million in occupancy. These increases were offset in part by decreases of $10.6 million in technology, communication and bank operations and $1.7 million in FDIC assessments, non-income taxes and regulatory fees for the three months ended March 31, 2025 compared to the three months ended March 31, 2024.

Current wording

The $3.2 million increase in non-interest expense for the three months ended June 30, 2025 compared to the three months ended June 30, 2024 primarily resulted from increases of $7.7 million in professional services, $1.7 million in FDIC assessments, non-income taxes and regulatory fees, $0.9 million in commercial lease depreciation and $0.9 million in salaries and employee benefits. These increases were offset in part by decreases of $5.8 million in technology, communication and bank operations and $2.4 million in other non-interest expense for the three months ended June 30, 2025 compared to the three months ended June 30, 2024.

Previous wording

Included in the $10.6 million decrease in technology, communication and bank operations for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 was $7.1 million of deposit servicing fees related to periods prior to 2024 that were recorded in the three months ended March 31, 2024.

Current wording

The $6.8 million increase in non-interest expense for the six months ended June 30, 2025 compared to the six months ended June 30, 2024 primarily resulted from increases of $13.3 million in professional services, $7.6 million in salaries and employee benefits, $1.5 million in occupancy, $1.4 million in commercial lease depreciation and $1.1 million in loan servicing. These increases were offset in part by a decrease of $16.4 million in technology, communication and bank operations for the six months ended June 30, 2025 compared to the six months ended June 30, 2024. Included in the $16.4 million decrease in technology, communication and bank operations for the six months ended June 30, 2025 compared to the six months ended June 30, 2024 was $7.1 million of deposit servicing fees related to periods prior to 2024 that were recorded in the six months ended June 30, 2024.

Previous wording

Included in the $1.7 million decrease in FDIC assessments, non-income taxes and regulatory fees for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 was $4.2 million in FDIC premiums related to periods prior to 2024 that were recorded in the three months ended March 31, 2024.

Current wording

Included in the slight decrease in FDIC assessments, non-income taxes and regulatory fees for the six months ended June 30, 2025 compared to the six months ended June 30, 2024 was $4.2 million in FDIC premiums related to periods prior to 2024 that were recorded in the six months ended June 30, 2024.

Previous wording

Customers’ effective tax rate was (8.6)% for the three months ended March 31, 2025 compared to 23.9% for the three months ended March 31, 2024. The decrease in the effective tax rate primarily resulted from lower pre-tax income and an increase in discrete tax benefits from share-based compensation for 2025.

Current wording

Customers’ effective tax rate was 18.7% for the six months ended June 30, 2025 compared to 24.3% for the six months ended June 30, 2024. The decrease in the effective tax rate primarily resulted from lower pre-tax income, an increase in estimated income tax credits for 2025 and an increase in discrete tax benefits from share-based compensation for 2025.

Previous wording

Preferred stock dividends were $3.4 million and $3.8 million for the three months ended March 31, 2025 and 2024, respectively. There were no changes to the amount of preferred stock outstanding during the three months ended March 31, 2025 and 2024. Refer to “NOTE 11 – SHAREHOLDERS’ EQUITY” to Customers’ unaudited consolidated financial statements for additional information.

Current wording

Preferred stock dividends were $3.2 million and $3.8 million for the three months ended June 30, 2025 and 2024, respectively. Preferred stock dividends were $6.6 million and $7.6 million for the six months ended June 30, 2025 and 2024, respectively. On June 16, 2025, Customers redeemed all of the outstanding shares of Series E Preferred Stock for an aggregate payment of $57.5 million, at a redemption price of $25.00 per share. The redemption price paid in excess of the carrying value of Series E Preferred Stock of $1.9 million is included as a loss on redemption of preferred stock in the consolidated statements of income for the three and six months ended June 30, 2025. After giving effect to the redemption, no shares of the Series E Preferred Stock remained outstanding. There were no changes to the amount of preferred stock outstanding during the three and six months ended June 30, 2024. Refer to “NOTE 11 – SHAREHOLDERS’ EQUITY” to Customers’ unaudited consolidated financial statements for additional information.

Previous wording

Net interest income (the difference between the interest earned on loans and leases, investments and interest-earning deposits with banks, and interest paid on deposits, borrowed funds and subordinated debt) is the primary source of Customers’ earnings. The following table summarizes Customers’ net interest income, related interest spread, net interest margin and the dollar amount of changes in interest income and interest expense for the major categories of interest-earning assets and interest-bearing liabilities for the three months ended March 31, 2025 and 2024. Information is provided for each category of interest-earning assets and interest-bearing liabilities with respect to (i) changes attributable to volume (i.e., changes in average balances multiplied by the prior-period average rate) and (ii) changes attributable to rate (i.e., changes in average rate multiplied by prior-period average balances). For purposes of this table, changes attributable to both rate and volume which cannot be segregated have been allocated proportionately to the change due to volume and the change due to rate.

Current wording

Net interest income (the difference between the interest earned on loans and leases, investments and interest-earning deposits with banks, and interest paid on deposits, borrowed funds and subordinated debt) is the primary source of Customers’ earnings. The following table summarizes Customers’ net interest income, related interest spread, net interest margin and the dollar amount of changes in interest income and interest expense for the major categories of interest-earning assets and interest-bearing liabilities for the three and six months ended June 30, 2025 and 2024. Information is provided for each category of interest-earning assets and interest-bearing liabilities with respect to (i) changes attributable to volume (i.e., changes in average balances multiplied by the prior-period average rate) and (ii) changes attributable to rate (i.e., changes in average rate multiplied by prior-period average balances). For purposes of this table, changes attributable to both rate and volume which cannot be segregated have been allocated proportionately to the change due to volume and the change due to rate.

Previous wording

(4)Total costs of deposits (including interest bearing and non-interest-bearing) were 2.82% and 3.45% for the three months ended March 31, 2025 and 2024, respectively.

Current wording

(4)Total costs of deposits (including interest bearing and non-interest-bearing) were 2.85% and 3.40% for the three months ended June 30, 2025 and 2024, respectively.

Previous wording

Net interest income increased $7.1 million for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 primarily due to lower interest expense on deposits, partially offset by a decrease in interest income from interest-bearing deposits and investment securities. Average interest-earning assets increased by $776.2 million, primarily related to an increase in specialized lending.

Current wording

Net interest income increased $16.1 million for the six months ended June 30, 2025 compared to the six months ended June 30, 2024 primarily due to lower interest expense on deposits and an increase in interest income from specialized lending, multifamily and mortgage finance, partially offset by a decrease in interest income from investment securities, interest-bearing deposits and consumer installment loans. Average interest-earning assets increased by $966.5 million, primarily related to an increase in specialized lending.

Previous wording

The provision for credit losses is a charge to earnings to maintain the ACL at a level consistent with management’s assessment of expected lifetime losses in the loan and lease portfolio at the balance sheet date. Customers recorded a provision for credit losses on loans and leases during the three months ended March 31, 2025, which resulted primarily from slight deterioration in macroeconomic forecasts and an increase in loan balances held for investment. Customers recorded a provision for credit losses of $21.4 million for loans and leases and $1.2 million for lending-related commitments, respectively, for the three months ended March 31, 2025. Customers recorded a provision for credit losses of $16.0 million for loans and leases and $0.4 million for lending-related commitments, respectively, for the three months ended March 31, 2024. Net charge-offs for the three months ended March 31, 2025 were $17.1 million, or 48 basis points of average loans and leases on an annualized basis, compared to net charge-offs of $18.0 million, or 55 basis points of average loans and leases on an annualized basis, for the three months ended March 31, 2024. The decrease in net charge-offs for the three months ended March 31, 2025, compared to the three months ended March 31, 2024, was primarily due to lower charge-offs for consumer installment loans, partially offset by higher charge-offs for multifamily loans.

Current wording

The provision for credit losses is a charge to earnings to maintain the ACL at a level consistent with management’s assessment of expected lifetime losses in the loan and lease portfolio, lending-related commitments and investment securities at the balance sheet date. Customers recorded a provision for credit losses on loans and leases during the three months ended June 30, 2025, which resulted primarily from slight deterioration in macroeconomic forecasts and an increase in loan balances held for investment. Customers recorded a provision for credit losses of $18.5 million for loans and leases and $1.6 million for lending-related commitments, respectively, for the three months ended June 30, 2025. Customers recorded a provision for credit losses of $17.9 million for loans and leases and $1.6 million for lending-related commitments, respectively, for the three months ended June 30, 2024. Net charge-offs for the three months ended June 30, 2025 were $13.1 million, or 35 basis points of average loans and leases on an annualized basis, compared to net charge-offs of $18.7 million, or 56 basis points of average loans and leases on an annualized basis, for the three months ended June 30, 2024. The decrease in net charge-offs for the three months ended June 30, 2025, compared to the three months ended June 30, 2024, was primarily due to lower charge-offs for consumer installment loans.

Previous wording

The provision for credit losses for the three months ended March 31, 2025 and 2024 also included a provision for credit losses of $6.9 million and $1.1 million, respectively, on certain debt securities available for sale. Refer to “NOTE 5 – INVESTMENT SECURITIES” to Customers’ unaudited consolidated financial statements for additional information.

Current wording

The provision for credit losses for the three months ended June 30, 2025 and 2024 also included a provision for credit losses of $2.3 million and $0.3 million, respectively, on certain debt securities available for sale. The provision for credit losses on certain debt securities available for sale was $9.2 million and $1.4 million for the six months ended June 30, 2025 and 2024, respectively. Refer to “NOTE 5 – INVESTMENT SECURITIES” to Customers’ unaudited consolidated financial statements for additional information.

Previous wording

The table below presents the components of non-interest income (loss) for the three months ended March 31, 2025 and 2024.

Current wording

The table below presents the components of non-interest income (loss) for the three and six months ended June 30, 2025 and 2024:

Previous wording

Commercial lease income represents income earned on commercial operating leases originated by Customers’ commercial equipment financing group in which Customers is the lessor. The $1.0 million increase in commercial lease income for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 primarily resulted from the growth of Customers’ equipment finance business.

Current wording

Commercial lease income represents income earned on commercial operating leases originated by Customers’ commercial equipment financing group in which Customers is the lessor. The $0.8 million increase in commercial lease income for the three months ended June 30, 2025 compared to the three months ended June 30, 2024 primarily resulted from the growth of Customers’ equipment finance business.

Previous wording

The $2.0 million increase in loan fees for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 primarily resulted from increases in fees earned on unused lines of credit and servicing fees on consumer installment loans.

Current wording

The $3.9 million increase in loan fees for the three months ended June 30, 2025 compared to the three months ended June 30, 2024 primarily resulted from increases in fees earned on unused lines of credit and servicing fees on consumer installment loans.

Previous wording

Bank-owned life insurance income represents income earned on life insurance policies owned by Customers including an increase in cash surrender value of the policies and any benefits paid by insurance carriers under the policies. The $1.4 million increase in bank-owned life insurance income for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 primarily resulted from increases in death benefits received from insurance carriers and cash surrender value of the policies.

Current wording

Bank-owned life insurance income represents income earned on life insurance policies owned by Customers including an increase in cash surrender value of the policies and any benefits paid by insurance carriers under the policies. The $0.2 million increase in bank-owned life insurance income for the three months ended June 30, 2025 compared to the three months ended June 30, 2024 primarily resulted from increases in death benefits received from insurance carriers and cash surrender value of the policies.

Previous wording

The $51.3 million increase in impairment loss on investment securities for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 primarily resulted from impairment loss recorded on certain AFS debt securities that the Bank decided to sell as of March 31, 2025, in order to further improve structural liquidity, reduce asset sensitivity and benefit margin. The Bank began to sell these securities in Q2 2025. The actual amounts to be realized from the sales may differ from the fair values of these AFS debt securities at March 31, 2025.

Current wording

The $51.3 million increase in impairment loss on debt securities for the six months ended June 30, 2025 compared to the six months ended June 30, 2024 primarily resulted from impairment loss recorded on certain AFS debt securities that the Bank decided to sell in order to further improve structural liquidity, reduce asset sensitivity and benefit margin during the six months ended June 30, 2025.

Previous wording

The $1.3 million increase in other non-interest income for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 primarily resulted from an increase in deposit account fees, partially offset by a decrease in SERP income.

Current wording

The $5.4 million increase in other non-interest income for the three months ended June 30, 2025 compared to the three months ended June 30, 2024 primarily resulted from $1.8 million of fees associated with the sunsetting of a loan origination program with a fintech company, which was recently acquired by a bank, and an increase of $1.7 million in deposit account fees.

Previous wording

The table below presents the components of non-interest expense for the three months ended March 31, 2025 and 2024.

Current wording

The table below presents the components of non-interest expense for the three and six months ended June 30, 2025 and 2024:

Previous wording

The $6.6 million increase in salaries and employee benefits for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 primarily resulted from an increase in average full-time equivalent team members, including the addition of new banking teams in April 2024, and annual merit increases.

Current wording

The $0.9 million increase in salaries and employee benefits for the three months ended June 30, 2025 compared to the three months ended June 30, 2024 primarily resulted from an increase in average full-time equivalent team members and annual merit increases.

Previous wording

The $10.6 million decrease in technology, communication and bank operations expense for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 primarily resulted from decreases in deposit servicing-related expenses resulting from lower servicing fees and $1.9 million in fees for software as a service.

Current wording

The $5.8 million decrease in technology, communication and bank operations expense for the three months ended June 30, 2025 compared to the three months ended June 30, 2024 primarily resulted from decreases in deposit servicing-related expenses resulting from lower servicing fees and $1.3 million in fees for software as a service.

Previous wording

Customers incurred expenses of $2.1 million and $10.7 million to BM Technologies under the deposit servicing agreement included within the technology, communication and bank operations expense during the three months ended March 31, 2025 and 2024, respectively. The deposit servicing fees of $10.7 million incurred to BM Technologies for the three months ended March 31, 2024 included $7.1 million for periods prior to 2024. On April 1, 2025, Customers transferred approximately $166.7 million of deposits serviced by BM Technologies under a white label relationship to a new sponsor bank.

Current wording

Customers incurred expenses of $0.1 million and $3.4 million to BM Technologies under the deposit servicing agreement included within the technology, communication and bank operations expense during the three months ended June 30, 2025 and 2024, respectively. Customers incurred expenses of $2.2 million and $14.1 million to BM Technologies under the deposit servicing agreement included within the technology, communication and bank operations expense during the six months ended June 30, 2025 and 2024, respectively. The deposit servicing fees of $14.1 million incurred to BM Technologies for the six months ended June 30, 2024 included $7.1 million for periods prior to 2024. Customers’ deposits serviced by BM Technologies under a white label relationship decreased by approximately $187.0 million, including $166.7 million of deposits transferred to a new sponsor bank during the three and six months ended June 30, 2025.

Previous wording

The $5.5 million increase in professional services for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 primarily resulted from increases in consulting fees including to enhance the Bank’s risk management infrastructure.

Current wording

The $7.7 million increase in professional services for the three months ended June 30, 2025 compared to the three months ended June 30, 2024 primarily resulted from increases in consulting fees including to enhance the Bank’s risk management infrastructure.

Previous wording

The $1.1 million increase in occupancy for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 primarily resulted from higher lease expense and depreciation and amortization associated with the Bank’s expansion.

Current wording

The $0.4 million increase in occupancy for the three months ended June 30, 2025 compared to the three months ended June 30, 2024 primarily resulted from higher lease expense and depreciation and amortization associated with the Bank’s expansion.

Previous wording

The $1.7 million decrease in FDIC assessments, non-income taxes and regulatory fees for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 primarily resulted from a decrease in FDIC assessments. The FDIC assessments for the three months ended March 31, 2024 included $4.2 million for periods prior to 2024.

Current wording

The $49 thousand decrease in FDIC assessments, non-income taxes and regulatory fees for the six months ended June 30, 2025 compared to the six months ended June 30, 2024 primarily resulted from a decrease in FDIC assessments. The FDIC assessments for the six months ended June 30, 2024 included $4.2 million for periods prior to 2024.

Previous wording

The $1.8 million increase in other non-interest expense for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 primarily resulted from increases in provision for credit losses on unfunded lending-related commitments and charitable contributions.

Current wording

The $0.6 million decrease in other non-interest expense for the six months ended June 30, 2025 compared to the six months ended June 30, 2024 primarily resulted from a decrease in fees paid to a fintech company related to a consumer installment loan origination program, partially offset by an increase in provision for credit losses on unfunded lending-related commitments.

Previous wording

The table below presents income tax expense (benefit) and the effective tax rate for the three months ended March 31, 2025 and 2024.

Current wording

The table below presents income tax expense and the effective tax rate for the three and six months ended June 30, 2025 and 2024:

Previous wording

The $16.7 million decrease in income tax expense for the three months ended March 31, 2025, when compared to the same period in the prior year, primarily resulted from lower pre-tax income and an increase in discrete tax benefits from share-based compensation for 2025. The decrease in the effective tax rate for the three months ended March 31, 2025, when compared to the same period in the prior year, primarily resulted from lower pre-tax income and an increase in discrete tax benefits from share-based compensation for 2025.

Current wording

The $17.7 million decrease in income tax expense for the six months ended June 30, 2025, when compared to the same period in the prior year, primarily resulted from lower pre-tax income, an increase in estimated income tax credits for the year ending December 31, 2025, and an increase in discrete tax benefits from share-based compensation for 2025. The decrease in the effective tax rate for the six months ended June 30, 2025, when compared to the same period in the prior year, primarily resulted from lower pre-tax income, an increase in estimated income tax credits for the year ending December 31, 2025 and an increase in discrete tax benefits from share-based compensation for 2025.